UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

         Annual Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
                   For the fiscal year ended November 30, 1996

                          Commission File Number 0-6116

                         INTERNATIONAL DAIRY QUEEN, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                  Delaware                              41-0852869
           ----------------------                ------------------------
           State of Incorporation                I.R.S. Employer I.D. No.

7505 Metro Boulevard, Minneapolis, Minnesota               55439
--------------------------------------------             ----------
  (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (612) 830-0200
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:
                 Class A Common Stock, par value $.01 per share
                 Class B Common Stock, par value $.01 per share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X]  No

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or informa tion statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  [X]


               Number of shares of Common Stock outstanding as of

                                January 31, 1997:

                        Class A Common Stock - 13,925,670
                        Class B Common Stock -  8,208,575

Approximate aggregate market value of voting stock held by non-affiliates as of

                               January 31, 1997:

                       Class A Common Stock - $226,135,841
                       Class B Common Stock - $ 79,612,408
                       -----------------------------------
                                        Total $305,748,249
                       ===================================

Documents incorporated by reference:

1. Portions of the Annual Report to Stockholders for the year ended November 30,
1996 are incorporated by reference into Parts I and II.

2. Portions of the definitive proxy statement for the annual meeting of
stockholders to be held on March 18, 1997 are incorporated by reference into
Part III.



                                     PART I
ITEM 1.BUSINESS

GENERAL

The Company develops and services a system of more than 5,710 DAIRY QUEEN stores
in the United States, Canada and other foreign countries featuring hamburgers,
hot dogs, various dairy desserts and beverages, 34 of which are wholly or
jointly owned and operated by the Company; more than 420 ORANGE JULIUS stores in
the United States, Canada and other foreign countries featuring blended drinks
made from orange juice, fruits and fruit flavors, along with various snack
items; and more than 60 KARMELKORN stores featuring popcorn and other treat
items. The Company also owns 60% of Firstaff, Inc., specialists in the placement
and training of permanent and temporary office support personnel.

   To support and promote the businesses of its franchisees, the Company
undertakes product develop ment and market testing, creates and coordinates
adver tising programs, provides training and advisory services for store
operators and enforces quality control standards.

   A major portion of the Company's operating income is derived from franchise
fees paid by franchised stores and stores licensed by territorial operators.

   The Company also sells equipment to stores and sells other products used in
store operations to a system of independently-owned warehouses, which also
purchase approved products from other suppliers. These warehouses in turn sell
products to retail stores in their geographical areas.

   Except for providing financing for the sale of specialized equipment to its
franchisees, offering limited financing services for the remodeling of existing
fran chised stores and for providing certain leasing services for stores located
in shopping malls, the Company has not generally provided financial assistance
or guarantees for the construction or operation of franchised stores.

FRANCHISING SYSTEM

   DAIRY QUEEN. Stores are located in all states, except Rhode Island, as well
as Canada, Japan and several other countries. Most stores are located in smaller
towns and suburbs of larger cities. Some franchised stores offer only soft serve
dairy products, while others also offer some or all of the food items in the
BRAZIER line. The Company endeavors to have its DAIRY QUEEN franchisees offer a
more complete line of authorized products.

   The first DAIRY QUEEN store was opened in Illinois in 1940. In 1945, two
predecessor companies began to develop the DAIRY QUEEN system on a national
basis by granting territorial franchise rights for specific geographical areas.
In 1962, certain territorial operators formed International Dairy Queen, Inc.,
by contributing their territorial franchise rights and acquiring ownership of
the DAIRY QUEEN trademarks and other franchise rights.

   DAIRY QUEEN/BRAZIER stores offer a menu of fast food items, including
hamburgers, various dairy desserts (including soft serve and frozen yogurt) and
beverages which are marketed under the DAIRY QUEEN and BRAZIER trademarks.
Retail prices are determined by the store operators.

   The DAIRY QUEEN dairy dessert product line includes cones of various sizes,
BLIZZARD Flavor Treats, as well as shakes, malts and sundaes, and specialty
frozen confections. These products are prepared in the store from the Company's
specially formulated mixes by means of distinctive freezing and dispensing
units.

   The BRAZIER product line, adopted nationally in 1968, consists of a food menu
featuring hamburgers, hot dogs, chicken strips, barbecue and chicken sandwiches,
french fried potatoes and onion rings.

   The Company franchises DAIRY QUEEN stores either directly through agreements
with individual retail store operators or indirectly through agreements with
territorial operators who are authorized to grant franchise rights to store
operators within a specified territory.

   The terms of direct store franchise agreements used by the Company have been
modified from time to time as experience and changing circumstances have
required. The present DAIRY QUEEN/BRAZIER franchise agreement provides that the
store franchisee shall pay to the Company an initial service and set-up fee of
$30,000 ($15,000 for a Limited BRAZIER), and a continuing franchise service fee
of 4% of gross retail sales. The Company may permit certain qualified existing
franchisees to open additional stores by paying a reduced service and set-up
fee. Other forms of store agreements currently in force, most of which were
entered into prior to 1968, provide for varying levels of service fees computed
on different bases, such as the amount of total DAIRY QUEEN mix or products
dispensed. All direct franchisees pay some fees to the Company, and at November
30, 1996, 2,861 of the 3,903 stores franchised by the Company in the United
States and Canada were paying a continuing franchise service fee of 4% or more.

   At November 30, 1996, there were 137 DAIRY QUEEN territorial operators in the
United States who are licensed by the Company to grant franchise rights in
specific geographical areas. Most of the existing territorial operator
agreements were granted prior to 1950 during the early stages of development of
the predecessor companies. Since 1973, the Company has acquired the rights of a
number of territorial operators and has sought to convert subfranchisees to a
direct franchise basis. The Company expects to continue to acquire the rights of
territorial operators when it has the opportunity to do so on terms acceptable
to the Company.

   While the business terms of individual territorial operator agreements may
differ in certain respects, they generally provide for substantial uniformity in
terms of operation and product quality. The territory covered by territorial
operator agreements vary, although most are for limited geographical areas as is
evidenced by the fact that most have five or fewer stores. Many of the Company's
territorial franchises provide for continuing payments to the Company generally
computed on the basis of a percentage of the franchise service fees collected by
the territorial operator. However, at November 30, 1996, 124 stores were
subfranchised or operated by territorial operators who do not have any
obligation to pay the Company any franchise service fees. As to most of these
stores, the Company's right to control and supervise quality standards and
methods of operation is limited to that activity normally required of the holder
of a trademark or service mark under the laws related to trademark protection to
control the nature and quality of goods sold under its trademark or service
mark.

   TREAT CENTER. With the acquisition of KARMELKORN in 1986 and ORANGE JULIUS in
1987, the TREAT CENTER concept has emerged. This franchising concept combines
DAIRY QUEEN treat items together with either or both ORANGE JULIUS and
KARMELKORN menu items under one storefront within a shopping mall. By combining
the products of these franchising systems, the Company seeks to substantially
increase store sales volumes in order to support the signing of leases that
would be too expensive for a one product-line store. The present TREAT CENTER
franchise agreement provides that the store franchisee shall pay to the Company
an initial service and set-up fee of $15,000, and a continuing franchise service
fee of 6% of gross retail sales. The Company permits certain existing
franchisees to open additional stores without paying an initial service and
set-up fee. At November 30, 1996, there were 171 TREAT CENTER units, of which
150 were in the United States and 21 in Canada, all of which were franchised by
the Company.

   COMPANY-OPERATED RESTAURANTS. On February 7, 1996 the Company acquired 10
DAIRY QUEEN/BRAZIER stores and a majority interest in 21 other DAIRY
QUEEN/BRAZIER stores located in Kentucky, Tennessee and Indiana. Three
additional stores have subsequently been acquired.

   ORANGE JULIUS. In August 1987, the Company acquired ORANGE JULIUS of America
and ORANGE JULIUS Canada Limited, franchisors of retail stores which feature
blended drinks made from orange juice, fruits and fruit flavors. Most of the
stores are located in shopping malls. At November 30, 1996, there were 421
ORANGE JULIUS stores, of which 289 were in the United States, 104 were in
Canada, and 28 in other foreign countries, all of which were franchised by the
Company.

   The present ORANGE JULIUS franchise agreement provides that the store
franchisee shall pay to the Company an initial service and set-up fee of $15,000
($5,000 for certain existing franchises), and a continuing franchise service
fee of 6% of gross retail sales.

   KARMELKORN. In March 1986, the Company acquired Karmelkorn Shoppes, Inc., a
franchisor of retail stores which sells popcorn, candy and other treat items.
Most of the stores are located in shopping malls. At November 30, 1996, there
were 61 KARMELKORN stores, of which 56 were in the United States and 5 were in
foreign countries, all of which were franchised by the Company.

   GOLDEN SKILLET. In December 1981, the Company acquired the United States and
international (exclusive of Canada) franchise rights and other selected assets
of the GOLDEN SKILLET system. GOLDEN SKILLET stores feature fried chicken and
side dishes. In October 1992, the Company assigned the franchises, trademarks
and related assets for GOLDEN SKILLET in the contiguous 48 United States and the
District of Columbia to a non-affiliated company. The Company continues to hold
the GOLDEN SKILLET franchises and rights for the rest of the world. At November
30, 1996, there were 21 GOLDEN SKILLET stores in foreign countries, all of which
were franchised by the Company.

NEW STORES

   The Company is continuously seeking to open new stores. The ability of the
Company to open new stores is most dependent upon recruiting qualified operators
with suitable sites. New stores franchised by the Company are constructed in
accordance with the Company's specifications and standards. Substantially all
stores have a standardized appearance as well as uniform product lines and
operating methods.

   The Company also has a program whereby existing franchisees in good standing
with the Company may be awarded an additional store franchise at reduced cost.

FOREIGN OPERATIONS

   Foreign operations, excluding Canada, did not have a significant effect on
consolidated operations for the year ended November 30, 1996. The Company's
operations in Canada are substantially similar to its U.S. operations. Of the
839 foreign stores, at November 30, 1996, 583 were located in Canada, 86 in
Japan and 170 in 23 other foreign countries.

COMPANY SERVICES

   PRODUCT DEVELOPMENT AND TEST MARKETING. The Company continually attempts to
develop new products. New product concepts are obtained from vendors,
franchisees and Company personnel who work with the Company's Research and
Development personnel to develop a product concept into a finished product
suitable for the system.

   ADVERTISING AND SALES PROMOTION. The Company develops and conducts national
and area sales promotion and advertising programs principally through
television, radio and newspapers. For each of the four food systems, the Company
is assisted by an advisory council, the majority of whose members are elected by
members of the system. Substantially all amounts expended for advertising and
promotion are pro vided by franchisees who contribute to advertising funds.


<TABLE>
<CAPTION>
              THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION AS
           TO THE NUMBER OF STORES IN THE DAIRY QUEEN, ORANGE JULIUS,
                     KARMELKORN AND GOLDEN SKILLET SYSTEMS.

---------------------------------------------------------------------------------------------------------
                                                                           Converted
                                               Total                       to Treat    Ownership   Total
                                             11/30/95    Opened    Closed   Centers     Changes  11/30/96
---------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>      <C>                   <C>      <C>  
DAIRY QUEEN system
   United States
        Franchised by the Company:
            DAIRY QUEEN stores                3,283         52       (90)        --        29       3,274
            TREAT CENTER units                  124         23        (2)         5        --         150
        Franchised by territorial operators   1,593         75       (29)        --       (62)      1,577
        Company operated stores                  --          1         --        --        33          34
---------------------------------------------------------------------------------------------------------
                                              5,000        151      (121)         5        --       5,035
---------------------------------------------------------------------------------------------------------
   Canada
        Franchised by the Company:
            DAIRY QUEEN stores                  447         16        (5)        --        --         458
            TREAT CENTER units                   21          1        (1)        --        --          21
---------------------------------------------------------------------------------------------------------
                                                468         17        (6)        --        --         479
---------------------------------------------------------------------------------------------------------
   Other foreign                                162         47        (7)        --        --         202
---------------------------------------------------------------------------------------------------------
        Total DAIRY QUEEN stores              5,630        215      (134)         5        --       5,716
---------------------------------------------------------------------------------------------------------
ORANGE JULIUS stores                            433         29       (36)        (5)       --         421
KARMELKORN shoppes                               69          1        (9)        --        --          61
GOLDEN SKILLET restaurants                       21         --         --        --        --          21
Total                                         6,153        245      (179)        --        --       6,219
---------------------------------------------------------------------------------------------------------
</TABLE>


(a) The ORANGE JULIUS stores which closed in 1996 reflect the continued high
concentration of lease expirations during the 1988 through the 1996 period. The
Company's policy is not to renew its lease obligations with respect to stores
which have not achieved satisfactory operating results.

   The present franchise agreements provide that franchisees shall pay an amount
equal to 3% to 6% of gross sales to the advertising and sales promotion funds
administered by the Company. Funds administered by the Company for advertising
and sales promotion during 1996, 1995 and 1994 aggregated approximately
$57,500,000, $57,100,000 and $51,000,000, respectively.

   In addition to the funds administered by the Company, many stores expend
funds for local and regional advertising. Unexpended advertising funds were
$1,963,141 and $844,714 at November 30, 1996 and 1995, respectively.

   MANUFACTURING AND DISTRIBUTION. The Company is one of over 70 approved
manufacturers of DAIRY QUEEN mix. In addition to DAIRY QUEEN mix and
concentrates, the Company sells equipment which is manufactured by independent
manufacturers. The Company also purchases approved perishable and nonperishable
supplies and resells them to independently-owned authorized warehouses described
below. Substantially all of the Company's sales of products consist of products
purchased for resale from manufacturers and suppliers unrelated to the Company.
Neither the retail stores nor the authorized warehouses are required to purchase
any products from the Company.

   In order to provide stores with a convenient source of approved merchandise,
the Company has arranged for a system of over 70 authorized warehouses which
purchase, inventory and sell approved food and miscellaneous supplies to stores.
In addition to the authorized warehouses, there are a number of warehouses which
are not under contract with the Company which purchase products directly from
approved manufacturers for resale to stores.

   TRAINING AND ADVISORY SERVICES. The Company provides a wide range of training
and advisory services to its franchisees. New store operators attend an
intensive training course at the Company's training center in Minneapolis,
Minnesota. The at ten dees are given classroom and practical instruction in
procedures for product preparation, business and financial management, marketing
and promotion and related operational matters. Periodic refresher training and
instruction are available to all franchisees at the Company's training center
and at state, regional and national conferences and seminars. The Company also
makes available training aids and materials for the franchisees' use in
instructing store employees.

   QUALITY CONTROL. The Company conducts a periodic evaluation program designed
to insure a high standard of operation, quality and product uniformity. Through
126 field consultants and 15 regional managers, the Company furnishes
franchisees with information, advice and recommendations relating to facility
image, menu/product preparation, financial management, personnel management and
marketing.

   In order to maintain quality control, stores are generally required to use
approved products. The Company maintains a system of approved manufacturers
which are authorized to manufacture and sell products such as mix, meat,
containers, paper goods, equipment and sales promotion materials.

REGULATION OF FRANCHISE BUSINESS

   The Company and its franchisees are subject to various federal, state and
local laws affecting their businesses. The Company and its franchisees are
subject to a variety of regulatory provisions relating to wholesomeness of food,
sanitation, health and safety.

   The Company is also subject to a substantial number of state laws regulating
the offer and sale of franchises. Such laws impose registration and disclosure
requirements on franchisors in the offer and sale of franchises and may also
regulate termination, renewal fees and other substantive aspects of the
relationship between franchisor and franchisee. The Company is also subject to
Federal Trade Commission regulations governing disclosure requirements in the
sale of franchises. The Company believes it is in compliance with applicable
laws and regulations governing its operations.

COMPETITION

   All areas of the fast food service business are highly competitive, and the
Company has many competitors, some of whom are large companies selling a more
diversified line of products and having greater financial resources than the
Company. The Dairy Queen/BRAZIER, ORANGE JULIUS, KARMELKORN and Golden Skillet
stores compete with a large number of national chains as well as locally-owned
restaurants, drive-ins, take-home outlets and similar establishments, offering
food at low and medium prices. Extensive and active competition also exists in
the acquisition of commercial locations suitable for stores.

   A key competitive factor is the reputation and image of the system. The
Company believes that public recognition of DAIRY QUEEN/BRAZIER, ORANGE JULIUS
and KARMELKORN names contributes significantly to sales by stores.

   The Company owns the DAIRY QUEEN and BRAZIER trademarks registered in the
United States Patent Office and in each of the fifty states and in the Canadian
Trademarks Office. The Company also owns a number of United States and foreign
registrations of other trademarks, including ORANGE JULIUS, KARMELKORN and
GOLDEN SKILLET, and service marks used in the conduct of its business. The
Company believes that the success of its business depends to a large extent on
its trademark and service mark protection and, where and when necessary, intends
to continue to protect its trademarks by appropriate legal action.

EMPLOYEES

   At November 30, 1996, the Company employed 643 persons (including 96 persons
employed by Firstaff, Inc.) primarily in sales, supervisory, clerical and
managerial activities and employed 1,337 persons in its Company-operated
restaurants. The Company maintains a 401(k) Retirement Savings Plan which is
available to all full-time employees with one year or more of service. The
Company also maintains a Section 125 Plan which is available to full-time
employees after 30 days of service. The Company has never experienced a work
stoppage due to labor difficulty and considers its employee relations to be
satisfactory.

ITEM 2. PROPERTIES

   The Company owns an office building aggregating approximately 114,000 square
feet, of which 84,000 square feet is utilized by the Company for its principal
administrative offices and training center. Of the remaining 30,000 square feet,
approximately 27,000 is leased to third parties under leases expiring from 1998
to 2001.

   The Company also owns a mix manufacturing plant in Decatur, Georgia, a
Canadian office building/warehouse and the store facilities described below.
Warehouse space aggregating 35,023 square feet is under lease expiring in 2001
and eleven regional offices comprising 15,918 square feet are under leases
expiring from 1997 to 2005. Firstaff, Inc. has six offices in Minnesota,
aggregating 20,512 square feet, which are under leases expiring from 1997 to
2001. The aggregate rental charges for the Company's administrative, FIRSTAFF
and operating facilities, excluding stores, were approximately $775,000 and
$750,000 for fiscal 1996 and fiscal 1995, respectively.

   At November 30, 1996, the Company owned real property relating to eight
stores, all of which were leased to franchisees, with an aggregate net book
value of approximately $1,690,000. The Company leases all of the real property
relating to the 34 DAIRY QUEEN/BRAZIER stores operated by it, under leases
expiring from 1997 to 2016. See Notes 4 and 5 of Notes to Consolidated Financial
Statements for additional information regarding the Company's properties.

ITEM 3. LEGAL PROCEEDINGS

   From time to time, and at present, the Company is subject to various claims
and lawsuits in the ordinary course of business, some of which include
allegations by franchisees and subfranchisees that the Company has violated
antitrust and other laws. Such claims sometimes arise in connection with actions
by the Company to collect amounts owed by franchisees or to enforce or terminate
franchise agreements.

   HUGH COLLINS, ET AL. V. INTERNATIONAL DAIRY QUEEN, INC. AND AMERICAN DAIRY
QUEEN CORPORATION ("ADQ"), (United States District Court, Middle District of
Georgia, Macon Division, No. 94-95-4-MAC (WDO), commenced April 5, 1994). This
matter, previously reported, is an action by six franchisees in the State of
Georgia for declaratory judgement, injunctive relief, actual damages in an
unspecified amount, treble damages under the federal antitrust law, costs, and
attorneys' fees. Plaintiffs' claims are that (1) ADQ and the Company have tied
the purchase of the franchise to purchase of products sold in the DAIRY QUEEN
system and in violation of Section I of the Sherman Antitrust Act (15 U.S.C. ss.
1), and (2) ADQ and the Company have monopolized and attempted to monopolize a
"market" supposedly consisting of products sold in the DAIRY QUEEN system in
violation of Section 2 of the Sherman Antitrust Act (15 U.S.C. ss. 2).
Plaintiffs also allege that ADQ and the Company have breached contractual
obligations to them related to the approval of alternative manufacturers and
allege contract claims and claims for breach of fiduciary duty related to
advertising funds. On August 30, 1996, the Court granted plaintiffs' motion to
certify the case as a class action and established two classes and three
subclasses. On the basis of motions filed by the Company and ADQ, the Court
later modified the classes to exclude certain franchises with arbitration
clauses. The Court currently is considering the Company's and ADQ's summary
judgment motions on the cup and lid claims and the monopolization and attempted
monopolization claims. The Company and ADQ are vigorously defending against
plaintiffs' claims. No trial date has been set. See Note 8 of Notes to
Consolidated Financial Statements.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS

Not applicable.


                                    PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

   Both Class A common stock and Class B common stock are listed on the Nasdaq
National Market and trade under the symbols INDQA and INDQB, respectively.

   The following table sets forth for the periods indicated the high and low
prices for the Class A common stock and Class B common stock as reported by
Nasdaq. The prices shown below do not include retail markups, markdowns or
commissions.

--------------------------------------------------
                        Class A         Class B
                     Common Stock    Common Stock
--------------------------------------------------
                      Low    High      Low   High
--------------------------------------------------
Fiscal Year Ended
NOVEMBER 30, 1995
   First Quarter     $15.75 $18.00   $16.00 $19.00
   Second Quarter    $17.25 $19.75   $17.50 $20.00
   Third Quarter     $18.25 $22.00   $18.50 $22.37
   Fourth Quarter    $20.75 $23.25   $20.50 $22.00

Fiscal Year Ended
NOVEMBER 30, 1996
   First Quarter     $20.25 $24.75   $20.00 $25.50
   Second Quarter    $20.00 $22.75   $19.75 $22.75
   Third Quarter     $19.00 $22.25   $19.00 $21.50
   Fourth Quarter    $18.75 $21.00   $18.75 $20.50

   As of January 31, 1997, the approximate number of record holders of the
Company's Class A common stock was 888 and the approximate number of record
holders of the Company's Class B common stock was 432.

   The Company has not paid cash dividends on its common stock. Future dividends
will be determined by the Company's Board of Directors whose decision will be
made in light of the earnings, financial position and cash requirements of the
Company and other relevant factors existing at the time. The Company's credit
agreements contain provisions limiting the payment of dividends. See Notes 3 and
7 of Notes to Consolidated Financial Statements.

ITEM 6.  SELECTED FINANCIAL DATA

The information set forth under the caption "Selected Financial Data" on page 9
of the Registrant's 1996 Annual Report to Stockholders is incorporated herein by
reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

   The following table sets forth, for the periods indicated, items from the
Company's statement of income expressed as percentages of revenues, and the
percentage changes in the dollar amounts of such items from the prior period.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                         Percentages of                Percentage Increase
                                                            Revenues                       (Decrease)
------------------------------------------------------------------------------------------------------------
                                                   Years Ended November 30,        Fiscal 1996   Fiscal 1995
                                                   1996      1995      1994         over 1995    over 1994
------------------------------------------------------------------------------------------------------------
<S>                                                <C>       <C>      <C>              <C>        <C> 
Revenues:
    Net sales                                       74.9      80.0     78.9             3.5         10.8
    Sales of Company-operated restaurants            6.8        --       --               *           --
    Service fees                                   13.8       15.4     15.9             (.5)         5.4
    Franchise sales and other fees                   2.2       2.3      2.5             7.3          (.2)
    Real estate finance and rental income            1.9       2.0      2.4             5.0         (6.7)
    Other                                             .4        .3       .3            49.7       (14.0)
---------------------------------------------------------------------------
Total revenues                                     100.0     100.0    100.0            10.6          9.1
---------------------------------------------------------------------------
Costs and expenses:
    Cost of sales                                   67.6      72.0     71.1             3.9         10.5
    Costs of Company-operated restaurants            6.1        --       --               *           --
    Expenses applicable to real estate finance
        and rental income                            1.8       1.9      2.3             5.1        (7.2)
    Selling, general and administrative             11.0      12.0     11.9             2.2          9.8
---------------------------------------------------------------------------
Total costs and expenses                            86.5      85.9     85.3            11.5          9.9
---------------------------------------------------------------------------
Interest income, net                                  .6        .6       .5            12.1         45.8
---------------------------------------------------------------------------
Minority interest                                    (.3)       --       --               *           --
---------------------------------------------------------------------------
Income before income taxes                          13.8      14.7     15.2             3.4          5.7
Income taxes                                         5.4       5.8      6.0             2.9          5.7
---------------------------------------------------------------------------
Net income                                           8.4       8.9      9.2             3.7          5.7
---------------------------------------------------------------------------
* Not meaningful

</TABLE>


RESULTS OF OPERATIONS

   GENERAL. The Company's revenues are derived primarily from service and
franchise fees received from franchisees and the sale of perishable and
nonperishable supplies and equipment for use by franchised stores. Although the
Company does not allocate interest or selling, general and administrative
expenses by products sold or services rendered, it believes that a major
portion of its operating income results from service fees.

   1996 COMPARED TO 1995. The increase of $10,418,314 in net sales resulted
primarily from an increase of $10,275,987 in unit sales of frozen and non-frozen
foods, paper, plastics and manufactured novelties to authorized warehouses (who
in turn sell to franchisees) and an increase of $1,188,198 in permanent and
temporary placement and training fees by Firstaff, Inc. These increases were
partially offset by a reduction in equipment sales to franchisees of $1,467,518.

   On February 7, 1996, the Company acquired 10 DAIRY QUEEN/BRAZIER stores and a
majority interest in 21 other DAIRY QUEEN/BRAZIER stores located in Kentucky,
Tennessee and Indiana. Three additional stores have subsequently been acquired.
Net sales for these 34 stores through November 30, 1996 were $27,883,069 and
related cost of sales was $25,035,301. Net sales for the fourth quarter were
$7,998,602 and related cost of sales was $7,605,192.

   Service fee income was flat primarily due to the elimination of $1,115,323 in
1996 of service fees due from Company-operated restaurants acquired in 1996.

   The increase of $985,946 in 1996 in selling, general and administrative
expenses was primarily from an increase in personnel and legal support costs.

   The increase in net interest income of $278,974 in 1996 is primarily the
result of an increase in funds available for investing in interest-generating
activities.

   Minority interest represents the income from operations allocated to the
minority ownership in 21 DAIRY QUEEN/BRAZIER stores and Firstaff, Inc.

   The increase in net income per share of 9(cent) when comparing the 1996
period with the 1995 period was due to an increase in the Company's net income
and to a decrease in the average number of common and common equivalent shares
outstanding.

   1995 COMPARED TO 1994. The increase of $28,918,848 in net sales resulted
primarily from an increase of $22,921,941 in unit sales of frozen and non-frozen
foods, meat products (primarily chicken) and paper and plastics to authorized
warehouses, an increase of $2,324,517 in sales of promotional items sold to
DAIRY QUEEN stores, and an increase of $3,202,205 in training and temporary
placement fees by Firstaff, Inc.

   These increases were partially offset by a reduction in equipment sales to
franchisees of $1,671,845 when comparing 1995 with 1994. This decrease resulted
from the introduction of newly-designed menu boards which were offered to stores
at discounted prices during the 1994 introductory period and which resulted in
net sales of $7,303,574 in 1994.

   The decreases in real estate, finance and rental income and related expenses
in fiscal 1995 reflect a continued number of lease expirations. It is the
Company's policy not to renew the Company's obligations with respect to store
leases, except in certain limited situations.

   Selling, general and administrative expenses increased $3,987,301 due to
additional personnel and support costs, increased marketing and research cost,
legal costs, and other costs relating to the Company's higher overall level of
operations in 1995.

   The increase in net interest income in fiscal 1995 is the result of an
increase in the funds available for short-term investments and increased
interest rates.

   The 13 cent increase in net income per share when comparing the 1995 period
with the 1994 period was due to an increase in the Company's net income and to a
decrease in the average number of common and common equivalent shares
outstanding.

SEASONALITY OF BUSINESS

   The Company's business is highly seasonal. DAIRY QUEEN sales generally have
been higher during the spring and summer months, while ORANGE JULIUS and
KARMELKORN sales tend to be higher during the September to December
back-to-school and holiday shopping periods. Historically, the Company has
earned a substantial portion of its operating profit during the second and third
quarters (spring and summer months). The following table shows the Company's net
income by quarter for each of the past five fiscal years:

--------------------------------------------------
           First  Second   Third  Fourth
          Quarter Quarter Quarter Quarter   Total
--------------------------------------------------
Net income
(IN THOUSANDS)
1992      $4,406  $8,674  $10,536  $5,479  $29,095
1993       4,548   8,727   10,677   5,936   29,888
1994       4,614   9,260   11,164   6,383   31,421
1995       4,910   9,848   11,747   6,712   33,217
1996       5,089  10,206   12,387   6,763   34,445

LIQUIDITY AND CAPITAL RESOURCES

   Funds for working capital, acquisitions of territorial rights, acquisitions
of the Company's common stock and capital expenditures during the last three
years have been provided by internally-generated funds (net income plus
amortization and depreciation). Available liquid resources at November 30, 1996
included $38,384,589 in cash and cash equivalents. The Company does not have any
material commitments for capital expenditures during fiscal year 1996 and be
lieves that its existing credit arrangements, along with working capital
generated by operations, will be sufficient to meet existing and presently
anticipated needs.

IMPACT OF INFLATION

   The Company does not believe its business is affected by inflation to a
greater extent than the general economy. Generally, the Company has been able to
offset the inflationary impact of costs and wages through a combination of
productivity gains and price increases.

PROSPECTIVE INFORMATION

   The statements which are not historical facts contained in this report are
forward-looking statements that involve certain risk and uncertainties
including, but not limited to, risk associated with the uncertainty of future
financial results, the impact of competitive products or pricing, the effect of
economic conditions and other uncertainties detailed in the Company's filings
with the Securities and Exchange Commission.

ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

   An index to the consolidated financial statements and financial statement
schedules is found on page 35 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

 Not applicable.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Information with respect to Directors, appearing under "Election of
Directors" in the Company's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on March 18, 1997, is incorporated herein by reference.
The names, ages, and positions of all of the officers of the Company are listed
below along with their business experience during the past five years. Officers
are normally elected annually by the Board of Directors at its annual meeting.
Charles W. Mooty is the son of John W. Mooty. There are no other family
relationships among these officers nor any arrangement between any officer and
any person pursuant to which the officer was selected.


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                                                                Years with
Name                               Position with Company (1)                            Age       Company
----------------------------------------------------------------------------------------------------------
<S>                     <C>                                                            <C>         <C> 
John W. Mooty            Chairman of the Board and Chairman of the
                         Executive Committee and Director                               74          26
Michael P. Sullivan      President and Chief Executive Officer and Director             62          22
Edward A. Watson         Executive Vice President and Chief Operating Officer           52          25
Charles W. Mooty         Executive Vice President, Chief Financial and
                         Administrative Officer and Treasurer                           36           9
David M. Bond            Secretary, Assistant Treasurer and Controller                  60          27
Mark S. Broin            Vice President - Information Services                          51          25
George H. Fougeron       Vice President - Franchise Operations                          51          24
Stephen M. Frances       Vice President - Franchise Development and
                         Lease Management Services                                      47          11
John F. Hockert          Vice President - Financial Services                            54          29
Michael J. Leary         Vice President - Purchasing and Distribution                   57          25
Glenn S. Lindsey         Vice President - Research and Development                      56          15
Srinivasa B. Murthy      Vice President - Administrative Services                       53          25
Signe M. Pagel           Vice President - Human Resources, Meeting and Travel Services  47          26
Gary H. See              Vice President - Marketing and Consumer Research               50          22
William C. Zucco         Vice President - Law and General Counsel                       51           8

</TABLE>

(1) Unless indicated to the contrary, each of such person's primary occupation
for at least the past five years has been as an officer of the Company or a
subsidiary of the Company. John W. Mooty is a member of the Minneapolis law firm
of Gray, Plant, Mooty, Mooty & Bennett, P.A., with which firm he has been
associated for more than five years.


ITEM 11.  EXECUTIVE COMPENSATION

   Information with respect to directors and officers, appearing under
"Information Concerning Directors and Officers" in the Company's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on March 18,
1997, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

   Information with respect to security ownership of certain beneficial owners
and management, appearing under "Outstanding Stock" in the Company's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on March 18,
1997, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS

   Information with respect to certain relationships and related transactions,
appearing under "Information Concerning Directors and Officers" in the Company's
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
March 18, 1997, is incorporated herein by reference.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

(a) Index to exhibits, financial statements and financial statement schedules.                     
------------------------------------------------------------------------------------------------------------
     Financial Statements:
------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>  
         Consolidated balance sheet at November 30, 1996 and 1995                                  

         Consolidated statement of income for each of the three years in the period
             ended November 30, 1996                                                                  

         Consolidated statement of stockholders' equity for each of the three years in
             the period ended November 30, 1996                                                       

         Consolidated statement of cash flows for each of the three years in the period
             ended November 30, 1996                                                                  

         Notes to consolidated financial statements                                                

         Report of Independent Auditors                                                               
------------------------------------------------------------------------------------------------------------
     Financial statement schedules:
------------------------------------------------------------------------------------------------------------
         Consolidated schedules for each of the three years in the period ended
         November 30, 1996

         II - Valuation and qualifying accounts

         All other schedules are omitted since the required information is not present in amounts
             sufficient to require submission of the schedule or because the information required is
             included in the financial statements and notes thereto.
------------------------------------------------------------------------------------------------------------
     Exhibits:
------------------------------------------------------------------------------------------------------------
         No. 3(a)   Restated Certificate of Incorporation, as amended (incorporated herein by reference to
                        Registrant's Annual Report, Form 10-K, for the fiscal year ended November 30, 1991).

         No. 3(b)   Restated By-Laws (incorporated herein by reference to Registrant's Annual Report,
                        Form 10-K, for the fiscal year ended November 30, 1986).

         No. 11     Computation of Earnings per Share.

         No. 13     Registrant's 1996 Annual Report to Stockholders. Those portions of the 1996 Annual
                        Report to Stockholders expressly incorporated by reference herein, shall be deemed
                        filed with the commission.

         No. 21     Subsidiaries of Registrant.

         No. 23     Consent of Independent Auditors.

         No. 27     Financial Data Schedule.

(b)  Reports on Form 8-K.
------------------------------------------------------------------------------------------------------------
         No reports on Form 8-K were filed during the last quarter of the period covered by this report.
</TABLE>



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      INTERNATIONAL DAIRY QUEEN, INC.

                                      By  /s/ Michael P. Sullivan
                                          -------------------------------------
                                          Michael P. Sullivan
                                          President and Chief Executive Officer

Date:    February 21, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
<S>                                <C>                                 <C> 
/s/ Michael P. Sullivan             President and Chief Executive       February 20, 1997
------------------------------      Officer (principal executive
Michael P. Sullivan                 officer) and Director
                                    

/s/ Charles W. Mooty                Executive Vice President and        February 20, 1997
------------------------------      Treasurer (principal financial
Charles W. Mooty                    officer)


/s/ David M. Bond                   Controller (principal accounting    February 20, 1997
------------------------------      officer)
David M. Bond                       


/s/ Ernest F. Dorn, Jr.             Director                            February 20, 1997
------------------------------
Ernest F. Dorn, Jr.


/s/ Richard I. Giertsen             Director                            February 20, 1997
------------------------------
Richard I. Giertsen


/s/ Frank L. Heit                   Director                            February 20, 1997
------------------------------
Frank L. Heit


/s/ C. David Luther                 Director                            February 20, 1997
------------------------------
C. David Luther


/s/ Jane N. Mooty                   Director                            February 20, 1997
------------------------------
Jane N. Mooty


/s/ John W. Mooty                   Director                            February 20, 1997
------------------------------
John W. Mooty


/s/ Thomas R. Stuart                Director                            February 20, 1997
------------------------------
Thomas R. Stuart

</TABLE>




SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
INTERNATIONAL DAIRY QUEEN, INC.

                                           Additions
                              Balance at   Charged to                 Balance at
                              Beginning    Costs and                  End of
DESCRIPTION                   Of Year      Expenses     Deductions    Year
-----------                   -------      --------     ----------    ----

Reserves deducted from
related assets:

Doubtful accounts and notes:
Years ended November 30
1996                          $572,000     $177,636     $274,909(1)   $474,727
1995                           610,738      257,047      295,785(1)    572,000
1994                           845,071      347,771      582,104(1)    610,738


(1) Write-offs of oncollectible accounts and notes, net of recoveries.